TOP MACRO THEME(S):
- Deleveraging: Poland’s net international investment position (net IIP) has improved markedly in recent years indicating less reliance on foreign financing. Net IIP improvement, both in size (as % of GDP) and structure (less reliance on ‘hot money’) is positive for Poland’s rating assessment.
WHAT ELSE CAUGHT OUR EYE:
- The Monetary Policy Council raised interest rates by 100bps (the reference rate to 4.50%, the highest since October 2012). The post-meeting statement has not changed much as compared to the previous one. Comments from NBP governor at the press conference indicate that the surprisingly large move has not been a front-loading, but simply a reaction to incoming data, i.e. spike in inflation and strong economic activity indicators. He gave no guidance what to expect in the following months. In our view the MPC will go blind with the tightening cycle as long as the headline inflation rises (i.e. until June-July) and then will switch into ‘stagnation mode’ once it is confirmed that a two-digit inflation means stagflation at the same time. We now assume the reference rate will hit 6.00% in July and stays there until July 2023.
- According to tentative estimates, the registered unemployment rate in March dropped to 5.4% from 5.5% in February, slightly weaker than expected.
THE FORTNIGHT AHEAD:
- Economic activity indicators for March are likely to reveal negative effects of the war, with retail sales additionally held back by growing prices (see calendar for details).
- Final CPI figures for March will shed more light on underlying trend, which most likely barley changed (our estimate of core inflation: 6.8-6.9% y/y).
- Labour market statistics for March have been likely affected (employment boosted and wages dented) by refugees seeking jobs.
- Rising imports value and a seasonal decline of EU fund inflows probably dragged current account balance in February deep into the red.
NUMBER OF THE WEEK:
- 100bps – surprisingly large NBP rate hike in April, the largest since 1999.